Irish Central Bank expects Ireland to take EU-IMF loan as talks begin

As a team from the European Commission, the International Monetary Fund and the European Central Bank arrive for talks at the Department of Finance and our Central Bank it is expected that Ireland will accept a loan worth tens of billions of dollars to aid its crippled economy.

Although the Irish Government continues to shrug off any speculations of a financial bailout reports have emerged that the government could be offered a multi-billion euro “loan package”.

Prime Minister Brian Cowen is insisting the arrival of the EU Commission and the IMF does not mean that Ireland will receive a bailout but simply that they are analyzing the financial situation.

Patrick Honohan, the governor of the Central Bank of Ireland said on Thursday that he expects Ireland to accept a loan from the European Union and International Monetary Fund.

Honohan announced his frank assessment of the situation at a meeting of the European Central Bank board in Frankfurt. He said that loan which would need to be approved by the Irish Government would provide a financial “buffer” for Irish banks but would not be used.

He compare it to the idea of the what the U.S. did in 2008, injecting banks with cash to reassure investors.

Speaking to the Irish state broadcasters RTE he said “It's true that our banks need additional confidence. ... There have been substantial outflows of capital from Irish banks since April."

The European Central Bank and Irish Central Bank have filled the gap, as foreign investors have withdrawn or failed to renew deposits in Irish banks. There loans are estimated to total €130 billion. In recent months ECB's lending to Ireland has grown to represent nearly a quarter of the Frankfurt bank's total lending in the 16-nation eurozone.

Honohan said it is "desirable that the (Irish) banks should have more capital available to show to the markets: Look, this is beyond question."

In his position as governor he is independent from the government but said that he expects Ireland the EU / IMF group to agree to the terms and conditions of the loan which “will be made available and drawn down as necessary."